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Universidade Autónoma de Lisboa
e-ISSN: 1647-7251
Vol. 7, . 2 (November 2016-April 2017), pp. 50-63
THE DEBATE ON THE RELATIONSHIP BETWEEN GLOBALIZATION, POVERTY
AND INEQUALITY: A CRITICAL OVERVIEW
Vicente Valentim
vicentedinisvalentim@gmail.com
Master's degree in Political Science (ISCTE, Portugal). Degree in Piano Jazz by the School of
Music in Lisbon, Lisbon Polytechnic Institute. He concluded Minor in Political Science at the
Faculty of Social and Human Sciences, New University of Lisbon
Abstract
On this theoretical article, I critically present the ongoing debate on the relationship between
globalization, poverty and inequality. To do so, I rely on the typology put forward by Held &
McGrew (2007), which divides scholars between two main approaches: the globalists and the
skeptics. Among the first approach, one can then distinguish between neoliberal globalists
and transformationalist globalists. Among the second one, one can distinguish between realist
skeptics and Marxist skeptics. I go through the most important thinkers of each of these four
perspectives, summing up the most influential arguments put forward to support their view.
By grouping the views of these scholars, I show similarities and differences between the four
perspectives and thus contribute to making the debate more clear. In a further section, I
critically assess these arguments, identifying some of their strengths and shortcomings.
Keywords
Globalization; Inequality; Poverty; Globalism; Skepticism.
How to cite this article
Valentim, Vicente (2016). "The debate on the relationship between globalization, poverty and
inequality: a critical overview". JANUS.NET e-journal of International Relations, Vol. 7, . 2,
November 2016-April 2017. Consulted [online] on the date of last consultation,
observare.autonoma.pt/janus.net/en_vol7_n2_art4 (http://hdl.handle.net/11144/2783)
Article received on February 5, 2016 and accepted for publication on September 19, 2016
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The debate on the relationship between globalization, poverty and inequality: a critical review
Vicente Valentim
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THE DEBATE ON THE RELATIONSHIP BETWEEN GLOBALIZATION, POVERTY
AND INEQUALITY: A CRITICAL OVERVIEW
1
Vicente Valentim
1. Introduction
This theoretical article aims to introduce the core arguments that polarize the debate on
the relationship between globalization, poverty and inequality, in a critical manner.
The aforementioned debate is a most important one. First of all, its importance relies on
the fact that at its core lies a concern about human misery and the most effective way in
which to tackle it. Furthermore, in recent years, disagreements concerning this issue
have spurred an intense controversy, not only at the academic level, but also at the
political level, with different sides advocate diverging sets of policy proposals to tackle
poverty and inequality. This disagreement has triggered a large amount of literature
being published on this topic over the last years.
Against this background, this article has two main objectives. The first is to present the
main perspectives regarding this relationship, by referring to the thinking of some of its
most influential authors. To do so, I will address the views held by the each of those
perspectives concerning the following three points: whether or not globalization is an
empirically verifiable phenomenon; in which way, if any, do globalization, poverty and
inequality interact; and what kind of policies should be brought about as a ways of
tackling poverty and inequality. The temporal focus of the article is on post-cold war
developments, as this was the period in which the various debates concerning
globalization became more intense, including the one with which this article is concerned.
Nevertheless, occasional references will be made to earlier studies that are too influential
to be left aside.
The second objective of the article is to critically review the responses given to these
questions by the several perspectives presented, through a focus on some of their
strengths and shortcomings.
I shall carry out these two objectives by dividing the views of different scholars according
to two broad views, each of which is then subdivided into two perspectives. Such a
division is extremely helpful, as it allows one to identify similarities and dissimilarities
between the thinking of a great number of scholars, thus making the debate much more
clear.
The criteria used for dividing scholars into different perspectives will take into account
that the debate comprises two dimensions: one that is analytical, or empirical, and one
that is normative (Gilpin, 2001). The empiric dimension concerns whether or not scholars
1
The author would like to thank Emmanouil Tsatsanis, for all his precious help and suggestions, as well as
the two anonymous referees, whose reviews immensely improved the text.
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perceive globalization as a real and powerful process. The normative dimension concerns
whether or not scholars believe that the consequences of globalization over the overall
levels of poverty and inequality are, all in all, positive.
The scholars presented in the article will be divided according to their stance on these
two dimensions, following the typology put forward by Held & McGrew (2007). According
to these authors, one can first of all identify an opposition along the empiric dimension,
between globalist scholars transformationalist and neoliberal , who regard
globalization as an observable phenomenon, and skeptic scholars Marxist and realist
, who do not. Concerning the normative dimension, one can place neoliberal scholars in
one end, being highly favorable to policy measures that bring about greater market
integration. On the opposite pole stand Marxists, perceiving globalization as a
normatively undesirable process. Transformationalists fall in the middle for, even though
they believe globalization has brought about a great deal of negative consequences, their
policy prescriptions are usually towards changing the way in which integration is made,
not towards trying to stop it. Realists have a more ambiguous position on this issue, as
they do not necessarily perceive the overall outcomes of the globalization process as
being positive or negative. Instead, they argue that these outcomes as no more than
reflexes of interactions between different states with unequal power relations, each
pursuing its own national interests.
Before we come to the discussion itself, it is important to define the three main concepts
upon which the article draws. The first one is that of globalization. On this article, I follow
Steger’s (2003: 13) definition of globalization
“a multidimensional set of social processes that create, multiply,
stretch, and intensify worldwide social interdependencies and
exchanges while at the same time fostering in people a growing
awareness of deepening connections between the local and the
distant”.
Following the same author, I assume globalization to comprise four main dimensions: an
economic, a political, a cultural and an ecological one. The debate with which I am
concerned here relates to the first one, to which Steger (2003: 37) refers as
“the intensification and stretching of economic interrelations across
the globe”.
Central to this dimension is the extension of the reach of markets throughout the world,
which creates new linkages between national economies.
The second core concept is that of inequality. There are several kinds of inequality:
people can be unequal in terms of their access to health, power, security, or income, for
example. This article is concerned with the latter kind. However, even when we focus
exclusively on income, inequality can be measured according to different concepts. One
needs to distinguish inequality between countries measured through the differences
observed in the income of each of those countries; from inequality between countries
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measured through the differences observed in their mean incomes, weighted by their
population; and from inequality between the world individuals, regardless of the country
they live in (Milanovic, 2006: 1).
In the third place, regarding poverty, I rely on the UNESCO (2016: 1) definition,
according to which
“income poverty is when a family's income fails to meet a federally
established threshold that differs across countries”.
A commonly used standard for the definition of extreme poverty is the $1 a day threshold
(US purchasing power parity).
Once these three concepts have been defined, the remaining article will be structured as
follows: the second and third sections will deal with the first objective of the article that
of presenting the four main perspectives that polarize the debate on globalization,
poverty and inequality. I shall begin with the presentation of the two globalist
perspectives, and then follow with the presentation of the skeptic approaches. For each
perspective, I will address the three questions mentioned above: whether or not its
scholars believe globalization to be an empirically observable phenomenon; what is the
nature of the relationship between globalization, poverty and inequality, if there is indeed
such relationship; and what policies should be prescribed in order to tackle poverty and
inequality. After that, the fourth section will deal with the second objective: that of
critically assessing the four perspectives presented in the previous sections. Finally, the
fifth section concludes the article, by referring to its main contributions.
2. The globalists: transformationalists and neoliberals
Regarding the first point that I am to address whether or not globalization is an
empirically observable phenomenon there is an agreement between the two globalist
perspectives under discussion. Both transformationalist and neoliberal authors regard the
process of globalization as something significantly different from all other processes that
mankind has witnessed. Therefore, the discussion between these perspectives focuses
on the two remaining points under discussion here: the way in which globalization
interacts with both poverty and inequality; and the kind of policies that should be followed
in order to tackle poverty and inequality. Plainly put, their disagreements revolve around
Gilpin’s (2001) normative dimension.
Regarding whether or not globalization does have a relationship with poverty and
inequality, neoliberals state that it does, and that the outcome of such relationship is
mostly positive. According to this view, globalization leads to lower levels of poverty and
inequality because it enables foreign companies to invest in poor countries, thus creating
new jobs, and fostering economic growth that lifts people out of poverty (Stiglitz, 2001).
Also, the removal of trade tariffs enables the creation of a world competitive market in
which protectionism is discouraged, which means that poor countries have it easier to
export their products (Martell, 2010). Again, this leads to enhanced business
opportunities, job creation and economic growth, as well as to the creation of a world
labor division, which enhances poor countries’ chances of development (Held & McGrew,
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2007). Furthermore, globalization brings about higher levels of knowledge sharing that
can benefit the economic activities of poor countries (Friedman, 2005), as well as a
liberalization of finance that encourages foreign investment in those nations (Martell,
2010). And the fact that countries are open to foreign aid has enabled a large number of
development programs to cope with problems such as AIDS, education, and many more
(Stiglitz, 2001).
On the other hand, transformationalists also see a relationship between globalization,
poverty and inequality but, in sharp contrast with the neoliberal perspective, they regard
the outcome of such relationship as a mostly negative one. According to this view, the
contemporary process of globalization is rather pushing towards higher levels of poverty
and inequality.
Transformationalist authors criticize several points of the neoliberal argument. Their first
criticism is that there is a high level of hypocrisy on the part of developed states: even
though they put pressure on poor countries to remove restrictions on trade, most of them
do not remove their own restrictions (Held & McGrew, 2007). But even if there were no
such hypocrisy, the liberalization of trade when countries are in such unequal
development stages is bound to leave poor countries without a chance of competing with
products from wealthier countries (Martell, 2010). Also, the new division of labor that
neoliberals praise is not actually reducing the levels of inequality and poverty. Instead,
it is just reshaping their pattern: instead of a North vs South divide, we now have a
winners of globalization vs losers of globalization one (Hoogvelt, 2001). What is more,
financial deregulation brings about abrupt outflows of money, which make the home
economies of developing countries very unstable (Stiglitz, 2001). And, as far as foreign
aid is regarded, it forces poor countries to carry structural adjustments that lead to
greater levels of poverty and inequality (Martell, 2010). Because of that, even foreign
assisted programs that did lead to positive outcomes ended up leaving the aided country
with large debts to pay (Stiglitz, 2001).
The reasons mentioned above lead transformationalists to take issue with the neoliberal
idea that globalization is the path towards lower levels of poverty and inequality. Whereas
for neoliberals it is insufficient levels of trade and finance openness that are responsible
for the persisting levels of inequality and poverty, for transformationalists it is the
globalization process itself that should be seen as the main explanation for such levels.
It is important to illustrate this discussion on how globalization, poverty and inequality
interact by looking at the findings of some influent empirical studies. Let us first address
within-country inequality. One early famous study, published long before the ending of
the cold war, is the one by Kuznet (1955). This author analyzed the economies of the
United States, England and Germany, leading him to the conclusion that the evolution of
within-country inequality follows what became known as the Kuznet’s Curve: in a first
period the early days of industrialization and urbanization income inequality tends to
rise. But, in a second period,
“a variety of forces converged to bolster the economic position of
the lower-income groups” (Kuznet, 1955: 17),
thus reducing inequality.
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However, there have been some objections to this idea. One famous author to challenge
it is Piketty’s (2014). This author has studied the distribution of wealth in France, United
States and Britain, through a long time range of one century in the case of the two
Anglo-Saxon countries and of over two centuries in the case of France. From this
analysis, Piketty concludes that, historically, within-country inequality has taken the
shape of a U-Curve: after the great levels of inequality that could be found before World
War I, the post-war period witnessed a decrease in those levels. However, from the
1980’s there has been a new rise in inequality levels, a discovery that led the author to
argue that we could be entering a new Bèlle Époque.
These two studies are a first sign of how both globalists and neoliberals have empirical
data that supports their claims. Such controversy can be found when we focus on
between-country inequality, as well. For example, Milanovic’s (2011: 4) data suggest
that, in the mid 19th century,
“the ratio between the top and the bottom (of country mean
incomes) was less than 4 to 1”.
But that ratio has largely increased to 100 to 1 in 2007, thus meaning that most global
income differences today are dependent on location.
On the other hand, neoliberal authors assume that growth is distribution neutral,
meaning that changes in income inequality through time are uncorrelated to levels of
economic growth. Therefore, if the level of economic growth does not, in itself, lead to
higher income inequality, then higher levels of growth will, on average, lead to a decrease
in absolute levels of poverty (Ravallion, 2004).
Dollar & Kraay’s (2004) famous study makes a similar claim. Furthermore, these authors
draw a causality nexus between trade openness and growth: the rising growth levels that
accompany market integration translate in a proportional rise on the income of the poor,
which explains the decreasing levels of absolute poverty that these authors have found
among globalizing countries. Apart from that, they hold that the so-called “globalizers”
(i.e. developing countries that opened their economies to world trade) are catching up to
rich countries, while countries that did not open to the world economy are lagging behind.
The authors do acknowledge, however, that globalization does produce winners and
losers, especially in the short run, and thus call for the need to adopt welfare policies as
a complement to market openness. Nevertheless, they hold that, because market
integration produces wealth, globalizing states will be in a better position to pursue such
policies.
Let us now concern the last definition of inequality, the one measured between
individuals, without looking at the country they live in. Some authors (e.g., Fischer, 2003)
argue that one cannot find a trend towards higher levels of this kind of inequality
throughout the world. That is because countries with large populations, such as India
and China, are getting better off. Similarly, Sala-i-Martin (2006) reports that, after a
peak in the late 1970’s, world inequality has decreased consistently throughout the
1980’s and the 1990’s the period of greatest market integration.
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However, there is some controversy concerning this point, as well. Some
transformationalist scholars have taken issue with the view according to which the huge
growth of China and India in the last decades proves how market integration should be
prescript as a path towards economic expansion. Rather, according to authors such as
Martell (2010), the success of these countries was due, in part, to the fact that they were
sometimes able to restrict globalization, protecting their industries from the fierce
competition of the global economy.
The cases of India and China also draw our attention to a methodological issue that could
explain why the various studies produce different results: the need to take into account
the specific characteristics of each country, in order to come to robust conclusions
regarding the effects of globalization over levels of poverty and inequality. Some authors
(e.g., Srinivasan & Bhagwati, 1999) argue that in-depth case studies should be followed,
rather than regression-based cross-country studies, as the latter are unable to properly
appreciate some relevant differences between cases. Otherwise, it might be the case that
the results of one’s study depend on the specific countries that are included in the sample.
Before we move into the last point to be discussed the one concerning the policy
prescriptions that are put forward by each perspective a reference should be made to
the fact that some neoliberal authors argue that the discussion in turn of inequality levels
is actually irrelevant, as long as poverty in absolute terms is decreasing. If the poor are
getting better off, does it really matter that differences between them and the richer are
widening? This view is well expressed by authors like Lucas (2004) and Feldstein (1999).
The former states that the potential for rising living standards of the poorest people in
the world is much greater by focusing on an improvement of poverty levels than by
focusing on promoting equality. The latter argues that focusing on inequality rather than
on poverty is a violation of the Pareto principle, which states that all policies that bring
about an improvement to some, without worsening the condition of any, should be put
to practice.
Nevertheless, this view is also debated. For example, Milanovic (2007) argues that other
people’s income also enter one’s personal utility function. Because everyone inevitably
compares his or her income level to that of others, he or she will have a sense of injustice
when facing the fact that the difference towards others is becoming larger.
Given the two diverging theoretical views and the contrasting results of the empirical
studies mentioned so far lead, it should come as no surprise that scholars of these two
perspectives also disagree with respect to the last point that I aim to discuss here: the
one concerning which policy prescriptions have a better chance of reducing the levels of
poverty and inequality. On the one hand, as mentioned above, the neoliberal view holds
that the removal of barriers to international trade leads to greater levels of economic
growth, which in turn improve the condition of the worst off. Therefore, according to this
perspective globalization is a force pushing towards less poverty, and should thus be
prescribed (e.g., Dollar and Kraay, 2004). The effect of globalization on poverty is
regarded as benign, and therefore more globalization, through greater integration in the
global market, is the way to the eradication of the poverty that still persists.
On the other hand, as also mentioned above, transformationalist scholars defend that
globalization is leading to rising levels of inequality, and that measures should be taken
in order to counteract such an effect. This school has put forward a number of ambitious
models of world regulation, through the building of supra-national democratic political
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bodies democratic, that would be both representative and accountable to the world’s
population (e.g., Held & McGrew 2007; Rodrik, 2011). Whichever the specific
configuration of this world government, it would be able of implementing policies to tackle
inequality and poverty. Some concrete examples of worldwide policies to tackle inequality
are Piketty’s (2014) defense of global progressive taxes on capital, combined with a high
level of finance transparency; or Milanovic’s (2006) proposal of income transfers at the
national level, taking into account within-country, as well as between-country, inequality.
3. The skeptics: realists and Marxists
This third section aims at discussing two skeptic approaches to globalization: the realist
and the Marxist one. Regarding the first point under analysis on this article, both realist
and Marxist skeptics argue that globalists tend to exaggerate the empirical relevance of
the globalization process, as well as its novel character. However, there are important
differences between these two perspectives.
Let us start with the realist school, which focuses primarily on the relationship between
states. For these scholars, one cannot speak of a real economic globalization process, as
that would require a true integrated economy, something that does not truly exist.
Instead, what we can find is interdependence: nothing more than a relation of mutualism
between states (Waltz, 1999). Relations of power between states still matter, and without
understanding them, one cannot fully appreciate the interactions that take place on a
worldwide level (Wolf, 2002). The realist view of the international arena is that of
anarchy, with each state trying to carry out its own interests. In the definition of those
interests, sub state groups play a major role. Therefore, states behave in their external
affairs in ways that are determined to a large extent by pressures exerted upon them by
their internal groups (Gilpin, 2001).
Because of this view, realists are also skeptic towards the second issue under analysis
here: the existence of a relationship between globalization, inequality and poverty. In
fact, one of the most prominent realist thinkers, Krasner (1985), argues that most
scholars tend to exaggerate the importance of economic issues, thus overlooking other
important conditions, especially political ones. The division between powerful states in
the North and less powerful states in the South is nothing new. In fact, it is
“one of the defining characteristics of the present international
system” (ibid: 267).
On a slightly different view, Gilpin (2001) does acknowledge the fact that, since the end
of the Cold War, economic issues have had an importance that they did not have before.
Therefore, this realist author does call for the need to take economic issues into
consideration when studying the current inequality situation. But he does stress that we
should be careful not to focus too much on economy. Drawing too sharp a distinction
between economic and security-related affairs can be misleading, because
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“the international political and security system provides the
essential framework within which the international economy
functions” (ibid: 22-23).
The distinction between economics and politics should become clear by bearing in mind
the different purposes of each of them. The former is supposed to shed some light on
the way interactions between market and economic agents take place. But it is the task
of the latter to decide which policies should be taken. Even to leave the market
unregulated is a political choice one that is made by states. Therefore, far from being
truly global and ungovernable, realists hold that the contemporary world economy is
actually dominated by the most powerful states:
“the Triad of Europe, Japan and North America” (Hirst, 1997: 410).
To sum up, realists hold that focusing on the relationship between globalization, poverty
and inequality is to be missing the point. It is states, rather than the process of
globalization, that are to blame for their success or failure underpinning such issues.
Therefore, regarding the last point under analysis here the one concerning which
policies are best suited to cope with poverty and inequality, realists would argue for state-
specific measures, ones that allow developing countries to catch up to the most
economically developed ones. From their point of view, the fact that, even though some
developing countries are lagging behind, some Latin American and East Asian countries
are catching up to the most economically developed ones proves how differences
between countries are a product of the different strategies pursued by each of them (Held
& McGrew, 2007).
The second branch of skeptic thinkers to be presented here is the Marxist one. As
mentioned above, Marxists and realists share the same point of view regarding the fact
that globalists tend to overstate the empirical relevance of the process of globalization.
The difference lies on the fact that, for Marxist globalization scholars (e.g., Cammack,
2014) the writings of Marx and Engels are the best way to understand the current
globalization process. That is because the world of which those authors talked about
one in which capitalism would become a dominant force worldwide did not come to
being until the recent rise of the globalized economy.
However, it should be noted that there are some important differences between the
thinking of Marx and the recent developments of the Marxism approach. Whereas the
former argued that the expansion of capitalism to the whole world would lead to the
formation of capitalist societies with characteristics similar to those of Western capitalist
societies, the latter regard such globalization process as a process of imperialism driven
by the West, more concretely the United States (e.g., Kumbamu, 2010). According to
the contemporary view, globalization led to the creation of a relation of dependence of
peripheral countries towards central ones, instead of pushing towards the development
of Third World countries into advanced capitalist societies.
Marxist scholars are suspicious of the empirical verifiability of globalization mainly
because they regard globalization as more of a rhetoric matter than an empiric one. By
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associating globalization with imperialism, these authors argue that the hegemonic
neoliberal discourse according to which the outcomes of enhanced market integration
for the material conditions of the world population are, all in all, benign is nothing but
to throw dust into the public eye, in order to keep it from realizing the growing levels of
class inequality worldwide, thus making the neoliberal imperialist goal a more feasible
one (Berberoglu, 2010). Because
“overt imperial rule results in costly wars and disruption, especially
among a broad array of classes adversely affected by the imperial
presence” (Petras & Veltmeyer, 2011: 136),
this sort of camouflage is necessary to win over the support of ruling classes, as well as
that of mass population, in countries subdued by the imperialist forces.
Another major difference between this approach and that of realist scholars concerns the
crucial role that the latter ascribe to the state in determining the current state of affairs.
This is illustrated by the fact that one of the most famous Marxist globalization scholars,
Wallerstein (2004), elaborated the well-known world-systems analysis largely because
of his dissatisfaction with the centrality that debates concerning globalization ascribe to
the state. According to this author, one should rather look at the world we live in as a
single system, whose roots can be traced back to the 16th century and the development
of capitalism. Since then, the growth of capitalism and the expansion of the modern world
system have been concomitant, with the former acting as the unifying force of the latter,
which lacks a political model or common culture capable of acting as such. Even if the
state may have an important role in this process, it is not its main actor neither is the
individual. The main driving force of the imperialist nature of contemporary globalization
is, instead, the market (Cammack, 2014).
From this angle, the Marxist perspective does align with the neoliberal one in its view of
the economy as central to the process of globalization. However, the former draws a
much darker picture of the consequences of economic forces, as well as the reasons
underlying it, than the latter.
Given that the Marxist view of the globalization process is one in which peripheral states
have a relationship of dependence towards central ones, it is hard to talk about policy
prescriptions for coping with poverty and inequality. Globalization is regarded as a
process in which new forms of division of labor arise, leading to the creation of a
worldwide class struggle. Therefore, tackling the consequences of globalization is not
something that can be done in a top-down manner at the state-level. This being said,
Marxist authors do not think of globalization as something unstoppable. On the contrary,
they hold that its development was triggered by conscious decisions made by human
actors. Therefore, different decisions could have been made, and there is still time to
change the current course of globalization. Hence, these scholars call for an organization
of labor forces under competent leadership, thus allowing the working class to face
capitalist forces, putting an end to its exploitation (e.g., Berberoglu, 2010). Without that
kind of reaction, there can be no a way of stopping imperialism. And, as long as
imperialism persist, so will global poverty and inequality.